By targeting the U.S., the WTO is making it harder for us to defend against unfair trade.
If you’ve been following the trade debate over the past week — and really, who hasn’t! — then you’ve likely seen the Trump administration’s big announcement that the United States will not be bound by World Trade Organization (WTO) rulings.
If the administration does make good on its promise, it would mark a major shift in U.S. policy toward the WTO — and frankly, it is a long time coming.
For decades, the WTO has disproportionally targeted U.S. trade enforcement laws and made it harder for the United States to protect its workers and companies from unfair trade practices, a new white paper released on Wednesday finds.
Written by Terence Stewart and Elizabeth Drake, the paper outlines how the WTO’s Appellate Body has overstepped its mandate and repeatedly ruled against the United States in cases involving trade remedy disputes. While the United States is one of 164 WTO members, it has been the target of 58 percent of WTO decisions involving trade remedy disputes — and the WTO has ruled against the United States over 90 percent of the time.
Drake called these decisions “indefensible under any reasonable reading of these agreements.”
“It’s hard to believe that the U.S., which is not only one of the countries that helped to negotiate these agreements, but in many cases these agreements were modeled after U.S. laws and U.S. practice, itself is in violation of these same rules nine out of 10 times,” Drake said on a conference call with reporters Wednesday. “This is the view not just from those of us here in the U.S. who practice in this area, but there have been criticisms from other WTO countries, there have been criticisms from former WTO officials, from legal scholars and practitioners all over the world, that the Appellate Body is vastly overstepping the bounds of its mandate.”
Since 1995, the WTO has issued 38 separate decisions against U.S. trade remedy measures, nearly five times the number of such decisions issued against any other member. As a result, the United States and other countries are having a harder time enforcing their trade remedy laws, which provide the first line of defense for workers and companies coping with unfair trade practices like dumping.
Sen. Sherrod Brown (D-Ohio), who joined Drake and Alliance for American Manufacturing President Scott Paul on the press call, noted that “it’s American workers who pay the price” for WTO decisions. He pointed to the U.S. steel industry, which repeatedly has used U.S. trade laws to fight back against an onslaught of unfairly dumped products from China.
“Rather than providing American steel companies with a way to crack down on Chinese cheating, the WTO has undermined the tools our businesses need to defend themselves and their workers,” Brown said.
And now there is additional concern about China and the WTO, given an upcoming WTO case involving China’s market economy status.
China desperately wants to be labeled as a “market economy” by the United States, which would weaken the U.S.’s ability to issue anti-dumping and countervailing duties on dumped products like steel. According to U.S. law, China would need to meet six qualifiers to be named a market economy; China has met none of these criteria.
"It’s hard to believe that the U.S., which is not only one of the countries that helped to negotiate these agreements, but in many cases these agreements were modeled after U.S. laws and U.S. practice, itself is in violation of these same rules nine out of 10 times." Elizabeth Drake
But in December 2016, China filed a WTO dispute challenging Washington’s continued practice of labeling China as a “non-market economy.”
“The Chinese government puts the thumb on the scales for its companies, often companies controlled or owned by, yes, the Chinese government,” Brown said. “That’s hardly a free market.”
Brown added: “If China wins its case, as they have too many times before at the WTO, it would dramatically weaken our ability to fight back against illegal dumping that hurts our American companies.”
Brown noted that he wrote to President-elect Trump to urge a reset with China on trade, starting at the WTO. “If we can’t accomplish this reset through the WTO, we need to consider going around it,” Brown added, noting he is “encouraged” to see the White House taking direct action against China and other nations, when appropriate.
All WTO members, Drake noted, have a right to decide whether to implement decisions it issues. Washington has had a longstanding practice of implementing WTO decisions. But should it decide to shift course and no longer do so, the WTO can authorize a country that brought a trade case against the U.S. to withdraw its trade benefits.
“So, there is a price to be paid for refusing to implement,” Drake said. “But it is one thing that is worth considering. Is that price worthwhile in order to send a strong message to the WTO that this is no longer going to be business as usual, that until they actually comply with their mandate that the WTO members negotiated, that this sort of automatic implementation can no longer be assumed.”
Drake and Stewart also issued a set of recommendations for the United States in the white paper, including forming a coalition with other WTO members to reform the Appellate Body and establishing an independent commission of legal experts to decide whether the panel has deviated from review standards.
“The issue here is that the dispute settlement system is not honoring the rules that members negotiated that are supposed to constrain it and guide it,” Drake said.